Poverty estimates are a shot in the dark 

Context: The government, which earlier used to conduct Consumption Expenditure Surveys (CES) and update poverty lines, has not released any data on this lately. 

The last consumption survey of 2017-18 was junked.

Based on the leaked estimates of consumption expenditure from that survey, it was reported that poverty increased from 31% in 2011-12 to 35% in 2017-18 with the number of poor increasing by 52 million.  

However, recent estimates from the IMF and WB have reported a significant decline in poverty after 2011-12, although they differ from each other on the level of poverty as well as the magnitude of poverty reduction since 2011-12. 

What is the difference between both these estimates? 

It is argued that Consumption Expenditure Surveys (CES) do not capture the estimates of consumption expenditure correctly and are unfit for poverty measurement. 

The IMF uses Private Final Consumption Expenditure (PFCE) estimates from the national accounts. But the PFCE estimates do not give the distribution of consumption across households which is a prerequisite for estimating poverty. These are derived aggregates and are available for the country as a whole with no separate estimate for rural/urban or states. 

All committees have unanimously rejected the practice of adjusting survey estimates based on PFCE. This is not the practice in India, or anywhere in the world. 

The World Bank arrived at their figures by using estimates from the Consumer Pyramid Survey of Households (CPSH), a privately conducted survey by the Centre for Monitoring Indian Economy (CMIE).  While their methodology is also questionable, they try to adjust for the anomalies of the CPSH surveys to arrive at estimates as close as possible to the NSS surveys.  

But the real issue is not just what happened to poverty and inequality, but also what factors contributed to poverty reduction. 

What may have led to poverty reduction? 

Many of the initiatives, including the rural employment guarantee programme and the Food Security Act have contributed to improvement in the lives of the poor, pulling them out of poverty.

There is also a role of the in-kind transfers through the subsidized food scheme under the Public Distribution System. 

The expansion of the PDS during the pandemic has certainly contributed to reducing the misery of the poor.

Way forward

There is a need for strengthening the social safety nets and expenditure on food and livelihood schemes given the challenge of economic recovery with rising inflation. 

An important message is also to strengthen the statistical system and make it independent of state interference.

Given the controversy over poverty estimates, it is all the more important that the government conducts the CES at the earliest and decides the yardstick of measuring poverty which is the poverty line. 

Source: This post is created based on the article “Poverty estimates are a shot in the dark” published on 12th Apr 22 in The Indian Express. 

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